Grandparents Gifts to an ABLE Account

Posted by Haddad Nadworny on Sat, Jun 10, 2017 @ 08:04 AM

The Special Needs Financial Planning Team  Cynthia Haddad, CFP | John  Nadworny, CFP | Alexandria Nadworny, CFP  We are committed to offering educational workshops to organizations and parent  groups.  Please call Alex or click here to attend a workshop or discuss a presentation  to your group.

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Case Studies Using the ABLE Account:

I.    Protecting Social Security Eligibility

II.   Save and Have Control of Your Own Money

III.  Representative Payees Managing Income and Social Security Benefits 

IV.  Grandparents Gifting to an ABLE 

The ABLE account provides grandparents with the opportunity to gift to their grandchild with a disability in the same manner as they contribute to their typical grandchild's 529 account. Many grandparents want to treat all of their grandchildren equally and using an ABLE account as a savings vehicle for gifting may help. 

A Case Study

The Situation:

Our client has a strong belief in higher education and set the goal of establishing educational accounts for all of their grandchildren soon after they are born. They have just celebrated the arrival of their third grandchild. However, this beautiful baby boy was born prematurely and with significant health issues which will likely cause developmental delays.  It is already known that his hearing has meaningful, and perhaps total, impairment. 

Options to Consider:

While the ABLE account is an option for these generous grandparents to consider, they must be mindful of some of the limitations of the ABLE account that do not apply to 529 accounts. The limitations they should take into consideration might include:

  1. An individual can only own one ABLE account. In this case, if the grandparents opened an ABLE account for their grandson, the parents or the other grandparents would NOT be able to open a separate ABLE account for him. 
  2. They are allowed up to the $15,000 contribution limit (2018) to fund the ABLE account.
  3. If the balance in the ABLE account exceeds $100,000, the individual's Supplemental Security Income (SSI) eligibility is impacted. 

Another option is to gift the funds directly to the parents and have them specifically earmarked for the benefit of the child. Should the grandparents have financial wealth, they may want to explore the option of creating a Supplemental Needs Trust and purchasing life insurance on their lives to fund it upon their death(s).  These are only a few common strategies we discuss with families.  There are various strategies and considerations the grandparents can explore with their team of advisors to determine the most appropriate option to gift to their grandchild with special needs.

 

Questions? Talk with us.

 

Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual, nor intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. There is no assurance that the techniques and strategies discussed are suitable for all individuals or will yield positive outcomes.

The experiences described here may not be representative of any future experience of our clients, nor considered a recommendation of the advisor's services or abilities or indicate a favorable client experience. Individual results will vary.

Investing involves risk including loss of principal. Prior to investing in an ABLE account, investors should consider whether the investor’s or designated beneficiary’s home state offers any state tax or other benefits available for investments in such state’s ABLE program.

 

 

Tags: ABLE Account

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